Dividends payable is a liability account with a normal credit balance and is recorded on the declaration date.
When a dividend is formally declared to shareholders, the company's retained earnings balance is debited for the dividend amount, while the dividends payable account is credited for the same amount. A current liability account which reports the quantities of cash dividends declared but not yet distributed to stockholders by the board of directors. The declaration of a dividend, in fact, creates a temporary liability again for company. When a dividend is proclaimed, the total value is subtracted from the company's retained earnings and converted to the dividends payable temporary liability sub-account.
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